FINANCIAL SECTOR

Financial sector

• The financial sector is a category of the economy

made up of firms that provide financial services to
commercial and retail customers. This sector
includes banks, investment funds, insurance
companies and real estate.
• Financial services perform best in low-interest-rate
environments. A large portion of this sector
generates revenue from mortgages and loans,
which gain value as interest rates drop.
 Major factors Affecting the
Financial Sector
• Rising interest rates on a moderate basis: As rates
rise, it means that these companies can earn more
on the money they have and on credit they issue to
their customers.
• Helping consumers with finances: As consumers
decrease their debt loads, they lessen the risk of
defaults. This lighter load also means that they may
have a tolerance for more debt, further increasing
profitability.
• Conversely, investors should consider some of the
negative factors that affect this sector as well:
• Rapidly rising interest rates: If rates should rise too
quickly, demand for credit such as mortgages could
drop, which could negatively affect certain parts of
the financial sector.
• A flattening yield curve: If the spread between
long- and short-term interest rates drop too far, the
financial sector could start to struggle.
 BEFORE GST
• Accusing the former UPA government of not allowing the correct data to be
entered into bank records, Ravi Shankar Prasad said, “Time and again we have
stated that not a single loan given under our govt is Non-Performing Asset
(NPA).
• In 2008, the total advance to people given by the banks was Rs 18.06 lakh
crores. By March’14, the amount went up to Rs 52.15 lakh crore. The stressed
asset identified out of this was only 36 per cent. Now the stressed asset has
risen to 82 per cent out of that advances made in the UPA govt. This means for
more than one occasions the correct data could not make it to the records.
Under the so-called economist then Prime Minister Manmohan Singh, the entire
banking system went haywire due to all kinds of interference with it.”
• Further responding to the Congress attack over the multi-crore Punjab National
Bank (PNB) fraud, involving celebrity jeweller Nirav Modi and his uncle Mehul
Choksi, the Union minister sought a reply from former Finance Minister P
Chidambaram and Congress president Rahul Gandhi.
  Transaction fees in financial
IMPACT OF services such as credit card
FINANCIAL SECTOR payment,fund transfer,ATM
AFTER GST transaction,processing fees
onloan etc. Increased to 18%
.
 Individual have to pay RS. 3
more for every RS. 100 paid
as charges of bank
transaction.
 The taxation will be on Total
Expenses Ratio(TER) of
mutual fund and will be pay
go up by 3%.
• Policyholders have to pay higher premium on their
insurance. Ex:A family spend a total of RS. 50,000
p.a on insurance excluding service tax,expense will
be increase by 3% i.e,Rs.1,500.
• Mutual fund distributors earing upto Rs 20 lakh will
remain exempted from GST.
 Benefits to Banking industry

• Bank will be able to set off their GST liabilities against credit
received on purchase of goods.
• Under the existing CENVAT mechanism, banks are eligible to
take partial credit of excise duty and service tax paid on
procurement of qualifying goods and services which are
used for provision of output service.
• Banks do not get input tax credit of State VAT paid on any
goods procured by them. As all these indirect taxes will be
subsumed in GST, banks will be able to take credit of GST
paid on procurement of goods as well.
• Input tax credit is not allowed as per current CENVAT
rules. But under GST regime input tax credit will be
allowed which would be used by a bank for making
outward supply in the course of
• GST Will help to reduce tax evasion. Under GST doing
business will be easy. The increase in business will lead to
additional demand of funds. Addition demand of funds
will lead to increase in number of transactions in the bank
as the business and current scenarios ask to go for digital
transaction.